New Jersey beneficiaries of Social Security disability benefits have reason to be concerned about the future of the program. Government trustees released projections for Social Security’s solvency earlier this month and indicated that without strong action, Social Security disability funds will run dry by 2016.
The poor economy has taken a toll on Social Security. Because taxes on workers’ wages fund both the disability and retirement programs, recent high unemployment and under-employment have meant less money for Social Security. The government trustees also cite high energy prices as contributing to the crisis because paying more for energy effectively decreases wages.
The prospect of Social Security’s insolvency has dire consequences. If the trust funds run dry, then the only source of income for Social Security programs will be payroll taxes. The trustees estimate that payroll taxes, even if the economy recovers, would only be able to pay for approximately 75 percent of the benefits to which current recipients would be entitled.
Already, payroll taxes do not cover benefits paid by Social Security, but the trust funds still earn enough interest to keep growing until 2021. Currently, the trust funds contain $2.7 trillion in the form of U.S. Treasury bonds.
Recognizing the potential harm to beneficiaries if the SSDI fund is allowed to run out in 2016, the trustees encouraged Congress to move retirement program money to disability benefits. This was the temporary solution in 1994.
Critics claim that the trustee projections are too pessimistic in light of Social Security’s long history as a public program, pointing out that Social Security has survived 13 recessions over the last 77 years.
Source: New Jersey Herald, “Social Security heading for insolvency even faster,” Ricardo Alonso-Zaldivar and Stephen Ohlemacher, April 23, 2012